The iTraxx Crossover index was little changed on Monday, in line with moves in European equity markets and ignoring a sharp 8-percent fall in China's domestic stock market, its fourth straight losing session.
The index, viewed as a barometer for risk appetite, returned to opening levels of 189.5 basis points at 1330 GMT, after tightening slightly during early morning trading, a trader said.
"The market's a bit firmer overall," a trader said. "People aren't really too worried about China." In late February, a steep decline in Chinese stocks coincided with a rise in volatility in credit spreads, with the iTraxx Crossover index widening sharply.
Analysts now argue that the market's main concern then was the state of the US housing market, and that there is little to link the performance of Chinese stocks with other risk assets, other than a reminder that markets can turn sharply. Meanwhile, the cost of insuring French retailer Casino's debt against default rose by 1 basis point to 39 basis points, the trader said, having earlier risen as much as 8 basis points.
Shares in the company rose as much as 9.4 percent, beginning their ascent while Casino's chairman and chief executive, Jean-Charles Naouri, was speaking at company presentations to investors in London.
A Casino spokeswoman declined to comment on the purpose of the roadshow. Speculation of a merger between Casino and its majority shareholder Rallye also surfaced, which was later denied by Rallye, leaving spokespersons at the two firms and analysts puzzled as to the sudden surge in shares.
In telcoms, CDS on TeliaSonera tightened 1 basis point to 20 basis points at 1400 GMT, a second trader said, after a source told newspaper Svenska Dagbladet that the Swedish government would probably sell its entire 37 percent stake in the Nordic telcoms group to another operator.
KPN's CDS also tightened 1 basis point to 40.5 basis points. The Dutch telcoms group signed a five-year contract with Ericsson under which Ericsson would manage KPN's access networks in the Netherlands. But activity was thin. "It's been a snoozathon at best," a trader said.
British Telecommunications Plc, part of BT Group, added to an already heavy corporate pipeline with plans to issue a three-part bond denominated in euros and sterling after a roadshow starting June 6. The bond sale, BT's first since 2001, comes after the company in May unveiled a 2.5 billion pound ($5 billion) share buyback programme, boosting returns to shareholders, and may indicate that the company has decided against a potential securitisation.
The bonds will include change-of-control clauses, which are designed to protect investors in the case of private equity take-overs, in which the purchase is mostly paid for by loading the balance sheet of the target with debt, and have become increasingly common in investment-grade issues.
Speculation has swirled in the past that BT could be a target for cash-rich buyout firms, although it has faded in recent months. In sovereigns, Italy is preparing a 10-year global benchmark bond in dollars, via Citigroup, Lehman Brothers and Merrill Lynch International.
Meanwhile, the German federal state of Berlin plans to sell a jumbo benchmark Landesschatzanweisung, or state bond, with a long-term maturity.
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